Development of Multilevel Monte Carlo Algorithms for Mathematical Finance

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Title
Development of Multilevel Monte Carlo Algorithms for Mathematical Finance

CoPED ID
699afc78-05d8-43ae-b25c-f7de85048c11

Status
Closed

Funders

Value
£149,148

Start Date
Jan. 1, 2007

End Date
March 30, 2008

Description

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This Springboard Fellowship will help me enormously in my mid-career move into computational finance after 20 years of computational fluid dynamics, simulating the flow through aircraft gas turbine engines. The research topic concerns the pricing of financial derivatives options (based on equities, commodities, interest rates and exchange rates) using Monte Carlo methods which evaluate the average outcome from multiple simulations of possible future evolution subject to random inputs. This research area, the solution of stochastic differential equations, is a major growth area in mathematics, and it underpins much of the everyday working of the major banks in London, which in turn form a large part of the UK economy.Six months ago, I had an idea which signifiantly reduces the computational cost of the Monte Carlo calculations required to achieve a given accuracy. My preliminary research results, and numerical tests on model problems, are very encouraging. It has been well received by leading academic figures and has already led to invitations for three university presentations and four seminars at investment banks. My objective with this Fellowship proposal is to build on this initial success by further developing the numerical technique, which I refer to as the multilevel Monte Carlo method, to enhance its performance and make it competitive against the leading methods used today in the industry. Alongside the research itself, a major goal of the fellowship is to build collaborations with key academics worldwide and with leading banks in London. My aim is that these should continue long after the end of the Fellowship, with the banks being my major source of funding for subsequent research. Also, as I am still very new to this field of research, there are deficiencies in my understanding of the stochastic analysis theory which underpins this field and I will work to address these.

Mike Giles PI_PER

Subjects by relevance
  1. Monte Carlo methods
  2. Finance
  3. Numerical methods
  4. Stochastic processes
  5. Banks (monetary institutions)
  6. Computational fluid dynamics
  7. Simulation

Extracted key phrases
  1. Multilevel Monte Carlo Algorithms
  2. Multilevel Monte Carlo method
  3. Monte Carlo calculation
  4. Development
  5. Mathematical Finance
  6. Springboard Fellowship
  7. Research area
  8. Preliminary research result
  9. Major bank
  10. Computational fluid dynamic
  11. Research topic
  12. Subsequent research
  13. Major growth area
  14. Computational finance
  15. Fellowship proposal

Related Pages

UKRI project entry

UK Project Locations